Real Estate Mitochondria

MARKET UPDATE 26 SEPTEMBER 2013

Good evening and Welcome to the Australia Bureau of Statistics latest press release. I really love my country so the A still stands for Australia. But here, as in many countries, BS stands for something else entirely. I certainly have no idea what some people smoke, drink, take or where they’ve completed their tertiary studies but to produce such figures as I’ll reveal below, there just has to be something seriously wrong. How do they gather their figures? Who do they speak to? How do they sift and sieve the good from the bad or the lies from the truth and do any of them actually HAVE a mortgage, run a home or balance a bloody chequebook? The following is nonsense, means nothing and when I showed a few people today, they laughed and asked me to point them to this Place de la Nirvana where they could have a mortgage and household expenses that were less than $450.00 a week and where could they sign up. I said I’m sure I could find them somewhere but they’d be 200 kilometres from the nearest hospital, ‘maybe’ have internet and perhaps even have to pump their water by hand but it was do-able!

So, here it is….

Housing costs for private renter households increased by $25 (8 per cent) from $322 in 2009-10 to $347 in 2011-12, though the proportion of income spent on housing costs remained at 20 per cent, according to a report released today by the Australian Bureau of Statistics (ABS).

Director of the Living Conditions section, Ms Emily Cunningham said today’s report shows households that owned their home with a mortgage had the highest housing costs, averaging $432 per week. This represented 18 per cent of their gross household income. Those without a mortgage had the lowest costs paying $40 per week or three per cent of their income on housing costs.

The report shows that average housing costs for owners with a mortgage have been stable since 2007-08.

“In 2011-12, both owners with a mortgage and private renter households spent the same proportion of their income on housing costs as they did in 1994-95,” said Ms Cunningham.

The report found lower income households had lower housing costs per week on average but these costs represented a greater proportion of household income. Lower income households with a mortgage paid $314 a week on average, or 26 per cent of their gross weekly income on housing costs. Lower income households renting from a private landlord paid on average $295 per week, which represented 30 per cent of gross weekly income.

Since 1994-95, the proportion of households that owned their home outright dropped from 42 to 31 per cent. Those with a mortgage increased from 30 to 37 per cent and households renting privately have increased from 18 to 25 per cent.

Households in the Northern Territory, Australian Capital Territory, Western Australia and New South Wales reported average housing costs above the national average, while average housing costs in Victoria, South Australia and Tasmania were below the national average. Housing costs in Queensland were similar to the national average of $265 per week.

More details are available in the 2011-12 issue of Housing Occupancy and Costs, Australia (cat. no. 4130.0) available for free download from the ABS website at www.abs.gov.au.

Media note:

Housing costs comprise rent payments, rates payments (general and water) and mortgage or unsecured loan payments, if the initial purpose was primarily to buy, add to or alter the dwelling.

Estimates for the Northern Territory other than Darwin are not considered reliable. All of the ACT is defined as a capital city for this publication.

Low income households are those containing the 30 per cent of people with equivalised disposable household income between the 10th and 40th percentiles.

Please ensure when reporting on ABS data that you attribute the Australian Bureau of Statistics (or the ABS) as the source.

I’ve addressed the issue of true cost of home ownership in the past.

Why does the ABS keep quoting home ownership costs of an owner with a mortgage as a percentage of gross income? Mortgage payments are NOT NORMALLY tax deductible so they are paid out of AFTER TAX income – HELLOOOO!!!

So, if you are earning say $70,000.00 a year, you pay tax of nearly 35% of the amount above $37,000.00. So, if your AVERAGE (what the Hell relevance has that) mortgage and housing cost according to ABS is a mere $432.00 per week, you have to earn about $665.00 per week gross to pay the $432.00 AFTER TAX. So the ABS is taking a NETT figure cost of ownership and applying it as a percentage of a gross earnings figure. what kind of BS mathematics is that?

In REALITY (which is still nowhere near the truth which I’ll share later in this missive) using the ABS ‘mythical’ figure of $432.00 per week, the actual percentage comes from gross earnings of $70,000.00 (good money in anyone’s terms) and gross costs of ($665 pw x 52 weeks) $34,580.00 OR FIFTY PERCENT!

See how by manipulating and lying a REALITY of 50% (which is still RUBBISH) becomes 20%. You have to laugh, or cry, or COMPLAIN! Please feel free to write to them and tell them what a crock their statistics are!

I talk to mortgage brokers, agents, buyers, bankers and friends who hold mortgages and their experience is nowhere near the “average”. Fancy piling statistics from people who have “downsized” and taken out a new paltry mortgage for $100.000.00? Aaarghhh – now I’m getting frustrated!

At today’s ultra low rates just the NETT mortgage repayments locally are about $450.00 to $500.00 per week with many paying $700.00 per week – remember that is AFTER TAX. People taking out a mortgage NOW are foolish. They face the real possibility of inflation hiking rates 2% in a real hurry (so $450.00 per week doesn’t rise 2% as so many think, but to about $580.00 per week -again – AFTER TAX!) They also face a general market correction (long overdue) overlaid by an interest rate affected price drop. A double whammy. Take $130.00 a week nett off the family budget and watch your equity plummet and possibly put your loan underwater. Not a happy family. Throw job instability or reduced hours into the mix and its a disaster. The REAL cost of ownership is over 70% of gross principal earnings – FACT.

Like the HOT AIR BALLOON Stock Market, the residential real estate market is a very dangerous and volatile place to be.

Enough from me today. Heads up, rose tinted glasses off and don’t believe anything, even stuff I write! Do your own research, be critical, analytical and make INFORMED choices…

2 thoughts on “MARKET UPDATE 26 SEPTEMBER 2013”

I paid $235000 in nov last year for a 1970 built 3 bedroom 1 bathroom home with a 65 M2 workshop (with 3-phase power) on a 900 M2 block.
has scheme water and sewerage just like everywhere house, with several schools nearby and a train station down the road.

mortgage is $450/fortnight and rates, water rates and maintenance add $150 fortnight

houses aren’t that expensive if you look hard enough, just live within your means

Hi Matt and thanks for your comment. I realise that there are many areas across Australia more affordable than most. I cannot comment about the desirability of your suburb as I do not know Perth from that perspective. I too can find $235,000 homes within 80 kms of where I live on the Gold Coast in Queensland but quite frankly, I wouldn’t dare drive through those suburbs during the day let alone at night! Glad you’re enjoying where you are. WA is a great place to live…